It is said that it is very hard to plan for short term future, but nevertheless each of us need to safeguard our future by saving hard earned money to live a comfortable life when we are not working. This is the layman definition of retirement planning. With investment planning they key is starting early. If one starts early, one can look at creating a generous corpus thanks to the compounding interest applicable to investments over long periods of time.

Planning for retirement takes years of savings, sacrifices and careful diligence. One may invest themselves or choose from the retirement plans offered by professional companies. These generally come with dual benefit of insurance and investment. All the retirement products are aimed to protect value of investment while at the same time building a corpus and providing steady returns as well. Whatever be modus operandi, kick starting retirement planning requires the following steps for success.

Goal-based strategy: An individual looking for efficient retirement planning must place a goal-based strategy in order to build a pension or retirement corpus. Successful retirement planning starts with a vision which includes fulfilling objectives on the way.

Investment Avenues: Investment avenues and instruments need to be chosen keeping in mind the goals previously set. If goals are aggressive, more investment proportion needs to be made in equity markets and lesser in conservative funds. Individuals with conservative goals can keep their money in debt instruments or government securities that will help eliminating every risk as well.

Savings Discipline: We need to be disciplined with our planning for retirement. We must focus to invest regularly and consistently over the period of time enabling us to build our independent retirement fund. One can start with conservative investments and gradually increasing the amount as one grows old in their careers.

Diversification: Diversification during retirement planning is also crucial to limit risks. Rather than investing the entire amount in a single investment option, one should consider investing money in multiple instruments. This way if one asset class suffers, the entire corpus will not collapse. Diversification helps in earning steady returns from investment along with wealth maximization.

Understanding: Diversification is not possible without proper understanding of the space being invested into. The most important mistake people do is that they invest money in instruments that they don’t understand. There are lots of complex and exotic instruments available promising more than expected returns but investment in these products should only happen if an individual understands them and has the ability to take such risks.

Analyzing retirement portfolio regularly: The most important aspect of efficient retirement portfolio is to analyze regularly. Analyzing investment portfolio is important because it enables us to churn bad investments to more potential investments. There may be investments generating no returns at all which can be attributed to economic changes and government policies. More often than not the market presents enough opportunities to earn more returns and eventually build a bigger retirement corpus.

Avoiding mistakes while retirement: The basic phenomenon helping people reaching their retirement objectives is not taking all the decisions at the right time but avoiding all the wrong ones. Avoid investments with surrender charges as they can eat up the investment portfolio and limits investment flexibility as well. Also avoid liquid investments as they will be hindrance in meeting fixed expenses at various life stages. Lastly, do not buy investments with upfront commissions as they can turn out to be bad because your advisor has no incentive to provide service and education to you once investment is in place.

The author is Founder and CEO of Policybazaar.com